Business and industrial loans (B&I)

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y(llf</\ FARMERS HOME ADMINISTRATION A Rural Credit Agency of the U.S. DEPARTMENT OF AGRICULTURE

^ U.SpE?LOFAGRfCULTl/RE

NAT'! AGRIC. LfBRARY

BUSINESS

AUG 26 76 /^I^D

ROCUREMENT SF T Q^^ INDUSTRIAL
.URREN r SERIAL RECORDS LQANS (B&l)

Improved quality of rural life
is an end result of rural
development. Upgrading of the
economic environment will make
a material contribution to better
living, and this is the aim of the
Farmers Home Administration
(FmHA) program of loans to
further business and industrial
development. Business and
Industrial loans may be
made in any area outside the
boundary of a city of 50,000 or
more and its immediately
adjacent urbanized areas with
population density of more than
100 persons per square mile.
Priority will be given to
applications for projects in open
country, rural communities, and
towns of 25,000 and smaller.
FmHA cooperates fully with
other lenders.

Farmers Home Administra-
tion assistance ordinarily is
provided as a loan guarantee
whereby the agency contracts to
reimburse the lender for not to
exceed 90 percent of principal
and interest. Lenders are
responsible for making and
servicing the loans. Applicants
apply for the guarantee through
their private lenders. In some
special cases where a
guaranteed loan is not available,
FmHA may directly make and
service the loan.

PROGRAM AID NO. 1101

Applications will be con-
sidered without regard to the
race, color, sex, creed, marital
status, or national origin of the
applicant or of individuals he
may represent.

Who may borrow?

Any legal entity, including
individuals, public and private
organizations, and federally
recognized Indian tribal groups.

How may loan funds be used?

The basic purposes include
developing or financing business
or industry, increasing employ-
ment, and controlling or abating
pollution. Within this frame-
work, uses include, but are not
limited to:

1. Financing business and
industrial construction,
conversion, acquisition,
and modernization.

2. Financing purchase and
development of land, ease-
ments, equipment, facili-
ties, leases, machinery,
supplies, or materials, and
custom feed lots.

3. Supplying working capital
and funds for reasonable
fees and charges.

What is the guarantee?

It is an assurance to protect
the investor, and may cover up
to 90 percent of the principal
and interest of the guaranteed
note. The guarantee fee will be 1
percent of the principal loan
amount multiplied by the per-
cent of guarantee, paid one
time only at the time the loan
note guarantee is issued.

Is collateral required?

Yes. It must be of such nature
that, when considered with the
integrity and ability of the
project management, the sound-
ness of the project, and the
applicant's prospective earn-
ings, repayment of the loan will
be reasonably assured.

Must the applicant provide equity?

The applicant will be required
to provide sufficient cash or
other assets to provide reason-
able assurance of a successful
project. Ordinarily a minimum
of 10 percent equity at loan
closing will be required.

What is the repayment schedule?

Final maturity will not
exceed :

1. 30 years for land, build-
ings, and permanent
fixtures ;

2. 15 years for machinery or
equipment; or the life of
the machinery or equip-
ment, whichever is shorter;

3. 7 years for working
capital.

Interest will be due at least
annually after the loan is closed.
All or any part of a loan may be
repaid before it i.<^ due. without
penalty.

What will the interest rate be?

For guaranteed loans, the
interest rate may be fixed or
variable and will be determined
by the lender and the borrower,
consistent with the market rate.
The interest rate on loans made
by Farmers Home Administra-
tion will be computed on cost of
Treasury borrowing plus an
increment to cover administra-
tive costs; for public bodies
borrowing to install community
facilities necessary for
community development, the
rate will be 5 percent.

Revised June 1976

•ir U.S.

GOVERNMENT PRINTING O F F I C E : 1 97C - 66 9 -62 P